World Markets Crumble

[Winstonm]

Billionaire investor George Soros said the world was facing the worst financial crisis since World War Two and the United States was threatened with recession, according to an interview with the Austrian daily Standard.

 

"We really do have a serious financial crisis now," Soros was quoted as saying.

 

Japan's Nikkei (Osaka:^N225 - News) fell 4.4 percent by the midsession, to a two-year low. The index has shed around 17 percent this month alone as fears deepened that the U.S. subprime mortgage crisis will drag global financial markets lower.

 

South Korea's technology stocks, heavily dependent on the U.S. export market, were mauled, pushing the Korea Composite Stock Price Index (KSE:^KS11 - News) down 3.8 percent to its worst level since May. The KOSPI has lost around 14 percent so far this year.

 

Hong Kong blue chips (HKSE:^HSI - News) tumbled 5.5 percent, with U.S. recession fears dragging bellwether bank HSBC Holdings (HKSE:0005.HK - News) to lows not seen since October 2003.

 

Hong Kong-listed shares in mainland companies (HKSE:^HSCE - News) sank 7 percent. The Hang Seng Index (HKSE:^HSI - News) is down about 30 percent since a recent peak in late October and off 19 percent this year.

 

Australia's S&P/ASX 200 index (ASX:^AXJO - News) shed 4.8 percent to record its 12th straight session of declines. It hit a low of 5,290.5 -- its lowest intraday level since October 2006.

[mike777]

Well reread the other posts and threads.....all the posters...including you seem to care less if stocks go down....in fact you come across rooting for those rich guys to lose money. :)

 

I think the phrasing usually reads...rich corporate guys..or rich ceo or rich lobbyists stocks...etc etc...

[kenberg]

Wait! I am not rooting for anyone to lose money. I have no problem with someone being rich. Roughly speaking I believe in taking the world as I find it, hoping to make the lives of the less fortunate better, and trying to pay attention to the realities of what can be done and what cannot. Eg I think we should help people whose homes have been swept away by a hurricane, I don't think we need to rebuild them the home of their choice in the location of their choice, especially if they choose a place where their home is likely to be swept away by another hurricane. Put another way, I think we did too little, and I think promising, as Bush did, that we will rebuild NO to be one of the great cities of the world and, as to cost, well it will just cost what it will cost, was idiotic. But back to the current financial mess. I have no idea what we should do, I hope someone in power does. I hope, but I don't believe. When the history of the Bush administration is written, surely the title will be Too Little, Too Late.

[sceptic]

may be if the market crashes the people that led the world into possible reccesion will get an abrupt wake up call

 

after all you lot voted them in, unfortunately I expect the have feathered their nest well enough that only the numbties that voted them in get burnt

 

and I hold my hand up high, I really don't give a toss if it all comes tumbling down, maybe the world will be a better place once America is no longer the leading power in the world

 

I cant say I have ever met any chinese that are not pleasant, maybe it is thier turn for a bash at top dog, I dont want to see the russians get in, who in thier right mind would want some idiot in power that thinks they are above the law and wants to take over the world by any means possible hmmmmmmmmmmmmmmmmmmm perhaps if they did, no one would notice the difference, except the hammer and sickle over Iraq

[PassedOut]

But back to the current financial mess. I have no idea what we should do, I hope someone in power does.

Me too. At least the Fed is trying now.

 

Fed Makes Emergency 0.75% Rate Cut

[helene_t]

A recession was bound to happen sooner or later. I find it surprising that the World economy has been doing so well for so long. Presumably China had an enormous potential that was laying dormant during Mao, and also the internet has created new business opportunities at an unforeseen pace. Maybe we will return to the state of returning malaise from the 1980's.

[P_Marlowe]

But back to the current financial mess. I have no idea what we should do, I hope someone in power does.

Me too. At least the Fed is trying now.

 

Fed Makes Emergency 0.75% Rate Cut

... some where it was said, the long time

of low interest rates (generating cheap money),

was responsible for the current crisis.

 

I am not sure that generating more cheap

money helps.

 

With kind regards

Marlowe

 

PS: For that matter I dont think that a 100 billion

dollar package helps, if the write downs are a

multiple of that.

[P_Marlowe]

A recession was bound to happen sooner or later. I find it surprising that the World economy has been doing so well for so long. Presumably China had an enormous potential that was laying dormant during Mao, and also the internet has created new business opportunities at an unforeseen pace. Maybe we will return to the state of returning malaise from the 1980's.

Another reason, the depts of the american households

did finance the american / world economy.

 

The economy was driven by the consumption of the

middle class, which more or less translates to, the

middle class made lots of depts.

 

With kind regards

Marlowe

[Winstonm]

I think this pretty much rules out the decoupling theories - globalization is too young to not still be tied to the U.S. enonomy.

 

And, of course, if things get tough we have the brilliant economist, Dick Cheney, to fall back on, who once told us, "Deficits don't matter."

 

Hello, Mr. Banker? Yes, I called to let you know I can't pay my mortgage again this month. What's that? Yes, I know it's the fourth month in a row I've missed...What? Foreclose? No, no, no, no. You misunderstand. I'm simply running a deficit, here. And haven't you heard? Deficits don't matter. Mr. Banker? Mr. Banker?

 

Sir, this is the phone company. I'm sorry to say we've had to disconnect your service for unpaid bills.

[Winstonm]

Well reread the other posts and threads.....all the posters...including you seem to care less if stocks go down....in fact you come across rooting for those rich guys to lose money. :D

 

I think the phrasing usually reads...rich corporate guys..or rich ceo or rich lobbyists stocks...etc etc...

Mike,

 

You sound suspiciously like a supply-slider (sic intended) who has lost a bet.

Does the Laffer curve get the last laugh or has it been turned upside down?

[Al_U_Card]

Art Laffer's ideas were not revolutionary but they were cogent. Diminishing returns have been seen here in Canada with "under-the-table" transactions and cash payments to avoid excessive taxation. Creating value and not assigning value always gives a better result.

[jtfanclub]

Well reread the other posts and threads.....all the posters...including you seem to care less if stocks go down....in fact you come across rooting for those rich guys to lose money.

Nah. I don't think that the current drop is a good thing. I just think that these 'emergency' measures are more likely to make things worse than better.

 

The best thing to do is to ride it out, and find the new equilibrium. Fortunately, the strong markets in China and India should prevent a '30s style depression, unless we do something really stupid.

 

We're doomed, aren't we?

[Winstonm]

We're doomed, aren't we?

 

That pretty much sums it up, yeah. :lol:

 

The Blanche Dubois economy - always been dependent on the kindness of strangers.

[Al_U_Card]

Unfortunately (mostly for us) the financial powers that be know all about the last several hundred years of monetary manipulation etc. They know when to zig and they know when to zag. We could learn a thing or two.....

[Al_U_Card]

From another site

 

Just put up at

 

http://www.financialpetition.org/

 

Bring Transparency To Our Financial System

 

The Housing Bubble was created by intentional mispricing of risk allowing investment banks and others on Wall Street to siphon off hundreds of billions of dollars for their own enrichment, while ensuring that millions of Americans are turned into debt zombies.

 

Now we have Ben Bernanke “cutting interest rates” into bad information due to “rogue traders” and “bailout proposals” involving unsafe and foolish changes to Freddie and Fannie mortgage caps, which are explicitly opposed by these firms’ regulator (OFHEO.)

 

The Bond Market reacted violently to these actions today (1/24), spiking up the rate on the ten year bond by more than six percent, effectively revoking all of The Fed’s “rate action” in less than 24 hours. Mortgage costs are going to RISE, not fall!

 

As if that is not enough, Egan Jones, who has the same status as Moody’s, Fitch and S&P, today said that the “bond insurers”, known as “monolines”, need not $15 billion – but two hundred billion dollars to remain afloat!

 

WE THE UNDERSIGNED DEMAND THAT THE GAMES STOP!

 

Specifically, we demand that you, as our elected representatives, do all of the following:

 

 

CEASE any and all action on any “bail out” or “stimulus” package, as we, the people, cannot afford the tax bill that it will generate. Conservative estimates are that this “package” could cost up to $250 billion. We do not have the money to pay for this with ramping budget deficits.

 

 

FORCE through regulatory channels the taking back of ALL “off-balance sheet” conduits and SIVs onto bank balance sheets, with all securities to be marked to the market immediately.

 

 

AUDIT all chartered financial institutions for capital ratio compliance and forcibly merge all those who are unable to meet capital ratios to protect depositors and the banking system as a whole.

 

 

Stop lying to The American People. The Federal Reserve does not set interest rates. The Federal Reserve follows the demand and cost of short-term commercial credit. The market sets interest rates as we saw today with both the IRX (13-week T-Bill) and TNX (10 year Treasury) spiking up by more than SIX PERCENT in one day!

 

We are at risk of a full-on deflationary credit collapse in this country similar to what happened in the 1930s. If it occurs it will not be due to the expected and just contraction of the credit bubble which you allowed to be inflated by Wall Street, but rather due to your intentional actions which are and will continue to make the situation worse!

 

Housing prices must and will contract until a “median house” sells for approximately three times a “median income”, as has been the case for the last two hundred years. This not only cannot be stopped any attempt to do so will only cause those with money who fund both commercial and government debt to demand ever-moreonerous terms for the use of their money.

 

The market served its warning to you and The Federal Reserve today. Our vote depends on you listening to both the market and our voices.

 

 

Also this...

 

 

http://market-ticker.denninger.net/2008/01...rest-rates.html

 

[...] Oh, that wasn't all of it.

 

We also found out that a supposed "rogue trader" caused a multi-billion-dollar loss for a French Bank, which they had to unwind last week and into Monday.

 

Then this afternoon The Fed claimed this had nothing to do with their deliberations, and further, that they didn't know about it before their teleconference?

 

One word: HORSESHIT.

 

Let's talk about what probably really happened at The Fed.

Ben and Buds saw a precipitous drop in commercial credit demand last week. They were faced with either draining huge amounts of liquidity or dropping the FFT.

 

 

Instead of allowing the market to sort out what was going on or doing the right thing and telling the banks - both in the US and overseas - to fess up to what was going on "or else", they PANICED, and held an emergency meeting via teleconference, "agreeing" that the solution was an emergency rate action. This decision was allegedly made (according to Steve Lies-man) Monday night.

 

 

NOW we find out that the "collapse" in credit demand (and flight to Treasury debt) was actually caused by this "rogue trader" who spasm'd the equity markets worldwide. Or was it? Was that a rogue trader or was it really an institutional attempt - with authorization - on their part to bail themselves out of a bad position or three? Hmmm... who knows.... but the CAUSE of the panic is now clear.

 

 

And NOW the crack-whore equity market is demanding another 50 bips in rate cut next week!

 

Now this wouldn't be so bad except that BenDover had to inject a shitload of liquidity to maintain the target today. In fact, the slosh took a fairly sizeable rocket shot northward.

 

The bond market, being experts at sniffing out bullshit, saw all of the above and, having behaved itself up until this point along with a slowing economy, reversed hard, rocketing the cost of money for government debt upwards by six percent in one day! [...]

[grrigg]

Whenever I see someone use data in a deliberately misleading way I automatically lose respect for their positions.

 

Both posts said that yield on 10 year bonds spiked by 6% in 1 day. To me this would mean say movement from 3% to 9%, indeed an enormous and unprecedented event. In reality the move was from 3.281% to 3.426%. Something quite different eh? If you look at 6 month chart of TNX you will see that moves of similar (slightly smaller) magnitude both up and down have happened before and not too infrequently.

 

The story about the rogue trader is interesting but I have serious doubts about its imagined impact. Seven billion dollars is, of course, a lot of money but to the overall markets its a drop in a bucket. It will be interesting to hear the details of how he got away with that stuff or perhaps he is a scapegoat.

[Al_U_Card]

Me too. The purpose of the exercise is to get people to look into the situation more closely and to understand (if that is possible in the Byzantine world of high finance) the implications and ramifications of what is going on around us. :)

[jtfanclub]

The story about the rogue trader is interesting but I have serious doubts about its imagined impact. Seven billion dollars is, of course, a lot of money but to the overall markets its a drop in a bucket.

The real fear is that if this happened to a major bank by a junior peon, how many other banks is it happening to? That could cause a major panic.

[skjaeran]

Whenever I see someone use data in a deliberately misleading way I automatically lose respect for their positions.

 

Both posts said that yield on 10 year bonds spiked by 6% in 1 day. To me this would mean say movement from 3% to 9%, indeed an enormous and unprecedented event. In reality the move was from 3.281% to 3.426%.

You need to keep your math straight.

 

A movement from 3% to 9% is an increase in 6 percentage points , but at the same time a 200% increase. If you start out with 3 apples and suddenly have got 9 apples, the increase is 200%. It's obviously just the same if we are comparing %'s instead of apples.

[grrigg]

I understand the idea, but a move of 6 percentage points is not terribly huge. Its large for one day, but not really something to base government reform on. Tto me the move was presented in the way that made me think 6 actual percent or at least something far more terrible. Tell me how this quote is not misleading:

 

The Bond Market reacted violently to these actions today (1/24), spiking up the rate on the ten year bond by more than six percent, effectively revoking all of The Fed’s “rate action” in less than 24 hours. Mortgage costs are going to RISE, not fall!

[mike777]

You can get technical and talk in terms of basis points but why bother.

99% of the experts cannot even tell you what simple duration or convexity is in the bond market.

 

As for the public, forget it.

[Winstonm]

You can get technical and talk in terms of basis points but why bother.

99% of the experts cannot even tell you what simple duration or convexity is in the bond market.

 

As for the public, forget it.

I can't even spell bodn.

[kenberg]

Whenever I see someone use data in a deliberately misleading way I automatically lose respect for their positions.

 

Both posts said that yield on 10 year bonds spiked by 6% in 1 day. To me this would mean say movement from 3% to 9%, indeed an enormous and unprecedented event. In reality the move was from 3.281% to 3.426%.

You need to keep your math straight.

 

A movement from 3% to 9% is an increase in 6 percentage points , but at the same time a 200% increase. If you start out with 3 apples and suddenly have got 9 apples, the increase is 200%. It's obviously just the same if we are comparing %'s instead of apples.

My view here is that people who know math should take some pains to express themselves in ways that are less likely to be misunderstood. I guess the Fed cut the interest rate on short term loans by three-quarters of a percentage point. I believe this is widely reported as cutting it by three-quarters of a percent and this is understood as meaning that the old percentage rate minus the new percentage rate, is three-quarters, not that the new percentage rate is ninety-nine and a quarter percent of the old percentage rate. Given this common usage, describing something as an increase of six per cent is apt to be misunderstood. It's easy enough to say this in a way that causes no confusion.

 

The media often make a hash of anything involving mathematics, mainly because the people writing the stories have no idea what they are talking about. I recently read, for example, that over 350 million Americans have credit cards. Maybe someone signed up the stem cells. But the reporters can't help it, their minds are totally closed to mathematics, even to simple arithmetic. Folks who understand mathematics should try to speak plainly.

[han]

Get your math straight Grrigg!

[Gerben42]

Anyway I'm waiting for the markets to crumble a bit more before I buy anything. Keep 'em falling!